The finance ministry is planning to impose additional tax on cigarettes and diesel cars because some officials think that it will help them to earn more revenue igniting the inflation.
The finance ministry officials associated with the proposals said that the taxes on these two services would increase under certain plans that are aimed at helping the cash strapped government cope in the slowing economy.
One of the officials at the ministry who do not wish to disclose his identity said that there are many options on the table at this point of time including the rising duties on cigarettes as well as diesels cars. The search was on for all the options available in front of them to boost the revenues and the financial ministry is also keen to demonstrate as well as caution of its financial times go great stress. He further added that they are working extremely hard to ensure that the financial deficit target i.e. 4.6% of GDP is met.
Pranab Mukherjee the finance minister will take the final call after going through the review of the indirect tax collection figures for October. Increment in the service tax and excise duty was already discussed in the discussions at Prime Minister’s meeting with the economists in the midst of October.
The excise duty on cigarettes ranges from Rs 500 to Rs 1950 per thousand sticks. It is the maximum the government can impose without getting it approved by the Parliament. Presently, the excise duty on vehicles especially cars is based on the length and not on the fuel. Therefore, small car attracts 10% excise duty whereas with engine capacity of more than 1500 cc attracts 22% duty. According to Kirit Parikh former Planning Commission member if an expert panel recommended last year imposing additional excise duty on diesel vehicles of up to Rs 80,000.
